By Candice Zachariahs
Oct. 28 (Bloomberg) -- The Australian dollar pared losses after the central bank bought its own currency for the third day as it traded near five-year lows against the greenback. New Zealand's dollar advanced.
The currencies rose versus the yen on speculation Japan's central bank will join the Reserve Bank of Australia to intervene in currency markets after the Group of Seven industrial nations expressed concern yesterday about ``excessive volatility''.
``The RBA has managed to put a base in the Aussie at the moment,'' said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. ``Our view is that the Aussie dollar will continue to make new lows irrespective of the RBA's presence,'' she said, referring to the currency by its nickname.
The Australian dollar fell for a sixth day, dropping to 60.09 U.S. cents, the weakest since April 2003, before trading at 60.51 U.S. cents as of 11:49 a.m. in Sydney, from 60.58 cents late in Asia yesterday. It rose 0.8 percent to 56.53 yen from 56.11 yen yesterday.
New Zealand's dollar gained 1.3 percent to 54.69 U.S. cents from 54.01 in Asia yesterday. It bought 51.09 yen from 50 yen.
Australia's dollar has lost 36 percent against the yen in the past month and New Zealand's is 30 percent weaker as investors bought back Japanese currency borrowed in so-called carry trades and used to purchase the South Pacific nations' assets. The currencies have fallen 27 and 20 percent against the dollar, respectively.
RBA Intervention
Australia's dollar pared losses after the central bought its own currency as it came close to dropping below 60 U.S. cents for the first time since April 2003.
The central bank intervened in the market, a spokesman for the Sydney-based RBA said today by phone. He declined to be identified. The intervention came amid similar circumstances to those yesterday and on Oct. 24, when the bank ``provided liquidity,'' according to the spokesman.
Australia's currency is the worst performer of the world's 16 most-active currencies against the dollar and yen in the past month as investors dumped equities amid widespread concern the global economy will fall into recession.
The currency rallied briefly yesterday after the Group of Seven expressed concern over the ``recent excessive volatility'' in the exchange rate of the yen. The yen declined today against the dollar amid speculation Japan's central bank will sell its own currency for the first time since March 2004.
Carry Trades
Carry-trades and commodities ``have previously been big supporting factors for the Aussie,'' said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. ``They're being pared back in the global margin call that we're seeing.''
Benchmark interest rates are 6 percent in Australia and 6.5 percent in New Zealand, compared with 0.5 percent in Japan and 1.5 percent in the U.S. The differences in yield have attracted investors to the South Pacific nations' assets. The risk in such trades is that currency market moves will erase profits.
Australian government bonds fell for the second day. The yield on the 10-year note rose 6 basis points, or 0.06 percentage point, to 5.123 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 declined 0.509, or A$5.09 per A$1,000 face amount, to 101.006.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 6.330 percent today from 6.355 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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